German Finance Minister Schaeuble Warns of 2 More Years of Global Economic Turmoil

German Finance Minister Wolfgang Schaeuble said turmoil in the financial markets caused by Europe’s debt crisis may last another two years, as Group of Eight leaders prepared to discuss Greece and its impact on the global economy.

More than 2 1/2 years after Greece revealed its bloated budget deficit, Europe has “known a lot of crisis,” Schaeuble said in a recorded interview broadcast today on France’s Europe 1 radio. “It’s practically normal.” Even so, “in 12 to 24 months we’ll see a calming of financial markets,” he said.

At the same time, German Chancellor Angela Merkel’s government has a duty to voters to prepare for a potential Greek exit, Finance Ministry spokeswoman Silke Bruns said. “People have the right to expect the government to make preparations for all eventualities,” Bruns said at a regular government press briefing in Berlin today.

Merkel and fellow European leaders face pressure from their G-8 counterparts to do more to quell the crisis after almost $4 trillion was wiped from global equity markets this month amid speculation that Greece will exit the euro. The U.S., which hosts the G-8 summit starting today, faces economic challenges from the “damaging” situation in Europe, Treasury Secretary Timothy F. Geithner said yesterday.

European stocks headed for their biggest weekly decline since November and the euro touched a four-month low amid investor concern that the crisis is worsening.

“During the G-8, it’s very important to see that the Europeans form a common position as quickly as possible,” Schaeuble said in the radio interview. “In recent years we haven’t been quick enough” at doing that.

Cameron called for more to be done “to persuade euro-zone countries to take really decisive action” to deal with the problems rather than “kicking the can down the road,” he told ITV television today. The U.K. is not part of the 17-nation euro area.

‘False Promises’

Geithner, in a speech in Baltimore, highlighted the debate in Europe over encouraging growth, as demanded by Hollande, and the need to consolidate budgets and reduce debt insisted upon by Merkel. Merkel and Hollande said two days ago at their first meeting that they would consider measures to spur growth in Greece as long as voters there committed to the austerity demanded to remain in the currency region.

“We want Greece to stay in the euro,” Schaeuble said. “But that presupposes that Greece does on its side what is necessary to develop its economy.” Policy makers are open to “every suggestion targeting more growth,” he said. “It’s up to the Greek politicians to explain reality, not make false promises.”

European officials are working on contingency plans to deal with a possible Greek exit, European Union Trade Commissioner Karel De Gucht told the Belgian newspaper De Standaard in an interview published today.

“A year and a half ago, there might have been the danger of a domino effect, but today there are both within the European Central Bank and the European Commission officials who are working on the emergency scenarios in case Greece doesn’t make it,” De Gucht was quoted as saying by the newspaper.

Greek Downgrade

Greek political leaders began campaigning today for the June 17 election, the second vote in six weeks, after a rise in support for anti-austerity parties scuppered the formation of a government. Greece’s credit rating was downgraded one level by Fitch Ratings late yesterday on concerns the country won’t be able to muster the political support needed to sustain its membership in the euro area.

“An exit would require two conditions: for a Greek government to reject the terms of the EU/IMF program and for the rest of the region to take a hard line in any renegotiation process,” David Mackie, chief European economist at JPMorgan Chase & Co, said in a note. “Recent developments suggest that both of these conditions may now be falling into place.”